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What Happens To A Company After It Goes Into Liquidation?

5th November, 2023
Keith Steven

Written ByKeith Steven

Managing Director

07879 555349

He has rescued hundreds of companies and helped many of them turn around using CVA or pre pack. Could he help YOUR company?! Call him now 07833 240747

Keith Steven

Table of Contents

  • What is Creditors Voluntary Liquidation?
  • What are the implications for the directors after the liquidation?
  • What Happens In Compulsory Liquidation?
  • What Happens In A Members Voluntary Liquidation?
  • Who gets paid first after a company goes into liquidation?

After a company goes into a liquidation process, its assets, i.e. property and stock, are “liquidated” – turned into cash for payment to the company’s creditors, in order of priority. This results in your company being removed from the register at Companies House as it ceases to exist.

There are three types of liquidation:

  1. Creditors Voluntary Liquidation
  2. Compulsory Liquidation
  3. Members Voluntary Liquidation (cash is returned to the members as the company is solvent)

Note that shareholders and directors start the voluntary liquidation process. However, in compulsory liquidation, the creditors start the process by applying for a court order.

What is Creditors Voluntary Liquidation?

Creditors voluntary liquidation (CVL) is the most common process in the UK, with about 15,000 of these liquidations each typical year.

Usually, the company runs out of cash and cannot pay its debts on time. The directors are concerned that the business is simply not viable as creditors threaten legal action. In essence, it is appearing as an ‘insolvent company’.

The company directors then ask a liquidator, who must be a licensed insolvency practitioner (IP), to convene a meeting of the company’s creditors within 14 days. At the meeting, which is now often held virtually, the IP will present a statement of affairs of the company to outline the current position and explain the procedure. The creditors then vote on the appointment of the liquidator to “liquidate” the assets to try and repay them (hence it is called a “creditors” liquidation).

Once the liquidator is appointed, the directors no longer have any control or duties in relation to the company, but they are duty-bound to cooperate with the licensed insolvency practitioner and provide information in a timely manner. The IP will then look into the directors’ and if there has been very bad practice, misfeasance or fraud, they may become subject to a disqualification.

What happens to the assets after liquidation?

After the company has gone into liquidation the assets (if there are any!) are sold in order to pay back the creditors.  The Insolvency Practitioner will often employ a Chartered Surveyor to achieve the best price so they can’t be accused of selling assets on the cheap.  Sometimes the directors can buy back the assets after liquidation but again they must be at a fair price.

What happens to the debts after the liquidation?

If the assets sold do not cover any or part of the debts then they are effectively written off.  However, if there are some monies to be distributed then the creditors are paid in accordance with their ranking.  See this page for the creditors ranking.   Generally in a liquidation the unsecured creditors get nothing.

What happens to the shares after liquidation?

The shareholders are the very last in line for getting any payout from the sale of assets.  So, basically the shares are worthless.  Any shareholder can write these losses off against tax.

What are the implications for the directors after the liquidation?

  • As a director, if you owe the company money, i.e. have an overdrawn directors loan account, then the liquidator will seek to claim this from you. If the loan is substantial and not justifiable, they will take action against you.
  • Personal guarantees will be called in if applicable as lenders are unlikely to get all their money back.
  • The liquidator will investigate your conduct, but as long as you have behaved reasonably and properly then there shouldn’t be anything to worry about. Be aware that the use of Bounce Back Loans to fund personal spending over and above what would be expected in normal times could cause you problems. See this page for more information.
  • You may find that gaining senior employment in sensitive government departments/insurance companies and banking will be a bit more difficult as you may need to go through a “vetting procedure.”

Can the directors start a new company after liquidating the old one?

You can liquidate a company and start the same or a new business again, but only under strict rules and conditions. Restarting is a potential legal “minefield” and you need to take proper advice.

In summary;

  • Most importantly, you cannot use the same or similar trade or business name as the liquidated company without leave of the court or permission from the IP.
  • HMRC will likely ask for a VAT deposit from the new company if they have been a significant creditor in the previous company.
  • You may find that business insurance will be a bit more expensive, or less choice, for you in any new company.

Call us or read our Experts Guide to Creditors Voluntary Liquidation (see link below) if you want more details. Likewise, call us on 0800 9700539 for a free chat through your company’s issues.

Why not download our 2022 voluntary liquidation guide?

Additionally, if you would like to liquidate your company, call us on 0800 9700539 or you can fill out a form on our website and get a quote in minutes. We can talk you through the process, organise the legal paperwork and begin proceedings.

What Happens In Compulsory Liquidation?

A compulsory liquidation is when the company’s creditors have lost all patience to try to collect the debt. The debt must be over £750, undisputed, and the creditor must have notified the debtor of its intent to collect the debt. This often involves issuing a statutory demand first. If the debtor fails to pay the Statutory Demand in 21 days and does not dispute the debt, then the creditor may issue a winding-up petition.

If the judge grants the winding-up order, then the official receiver will interview the director and liquidate the assets of the business to try and repay the creditors. This process generally takes much longer than a voluntary liquidation and is more stressful and hassle for the directors involved. What is more, the official receiver has more resources and a willingness to use their powers to investigate the behaviour of the directors. They will also have more resources to pursue any money that the directors owe the company which could result in personal insolvency.

Can I stop the process?

Once a winding-up petition is issued then it is difficult to stop the process. The only way to stop the liquidation is to pay the debt or get the petitioner to agree to withdraw the petition. It may be possible to get an adjournment of the winding-up hearing to allow more time to find the funds or maybe even get a company voluntary arrangement organised, but you will need to move very quickly!

What are the implications for the directors in a compulsory liquidation?

As mentioned earlier, it is likely that the official receiver will more aggressively collect monies owed by the director to the company. The directors have to attend a lengthy interview process at the court. They also have more resources to use their powers to investigate the directors’ actions compared to a liquidator in a voluntary liquidation.

What Happens In A Members Voluntary Liquidation?

A Members Voluntary Liquidation (MVL) is the formal process to bring a solvent company to a close. It can be known a ‘solvent liquidation’. A licensed insolvency practitioner is appointed as liquidator and will realise the company’s assets, settle any legal disputes and pay any outstanding creditors and then distribute the remaining surplus funds to the company’s shareholders/members. In a MVL, the company must have paid or be able to pay all of its creditors and contractual liabilities. Once the liquidator has completed these formalities and received clearance from HMRC, the company will be dissolved and formally removed from the companies register, meaning it will no longer be registered at companies house.

An MVL requires 75% of shareholders who have been given notice of the meeting of members to pass the winding-up resolution.

This type of liquidation is appropriate when a company plans to close or wants to reduce taxes.

And now to some common questions, we hear:

What is the process?

Each type of liquidation has a similar yet unique approach. There are some basic steps that each liquidation involves:

  • The appointment of an insolvency practitioner/liquidator
  • Liquidation of the assets of the company.
  • Creditors, in order of priority, are paid using the liquidated funds.
  • Shareholders receive any extra cash once everyone else has been paid according to their priority.

In most situations, the end result is the company ceasing to trade, thus being struck off the register at Companies House.

How much time does it take?

This is variable to each situation. Once the insolvency practitioner is appointed, it takes between 2 and 3 weeks for the company to be placed into liquidation.


If you have received a statutory demand from a creditor, you only have 21 days to pay it, and if unable to be settled, a winding-up petition will be applied for by the creditor (since they have the right), which takes up to 2 weeks. Within 14 days of the winding-up petition, it is a legal requirement to conduct and engage in a winding-up hearing.

Until the process is fully complete, the liquidator remains responsible in overseeing the process in its entirety. To find out more about the role of the liquidator, see our page here.

How much does the process cost?

The costs of liquidation can put directors off but not doing anything is likely to cost you more in the long run! Generally, the costs start at around £4000 + VAT. This would be for liquidating a company with a single creditor, such as having an unpaid Bounce Back Loan (BBL) or HMRC. For more than one creditor issue, we would expect the fee to be approximately £4,500 plus VAT. For more complex issues, including companies who have landlords, employees, BBLs and supplier debts we will provide a written quote after our meeting with the directors to discuss the company’s options. Do get in touch to discuss your company’s liquidation, don’t delay and hope the problem will go away! Liquidation is a highly regulated insolvency process and there are NO shortcuts.

Who gets paid first after a company goes into liquidation?


If you are an employee of the business, you may not receive your last month’s wages, but you will be able to claim from the redundancy payments office for arrears of pay, holiday pay, and money in lieu of notice. You are unlikely to receive any expenses that are owed to you. Please see our page for employees here.

A creditor of the company

Realistically, you are unlikely to receive much money in liquidation – maybe 5p in the £1. If you are a secured creditor, i.e. if you have a charge over the assets of the company, then you may receive more or even everything back, but it completely depends. For more information on who gets paid first in liquidation then see our page on creditors priority.